Fanny Mae and Freddy Mac get Nationalized!

[HisSelf]

Yes ladies and germs. If Hugo Chavez nationalizes Venezuelan oil, that's nasty. If Vladimir Putin nationalizes Russian oil, that's evil. If Cuba nationalizes Coca Cola, that's just damned wrong!

But if the almighty U S of A, free booter (oops free market) government nationalizes the biggest mortgage lenders in the country, that's just good government.

I love it. And I especially love it that George W Bush junior is the guy who had it shoved down his throat.

I love it. I really love it.

Retire on THIS, George!

Edited September 10, 2008 by HisSelf

[August1991]

But if the almighty U S of A, free booter (oops free market) government nationalizes the biggest mortgage lenders in the country, that's just good government.

Freddie Mac and Fanny Mae were not primarily mortgage holders (or lenders to use your term). They offered mortgage guarantees.

In this, they perform a role similar to our (State-owned) CMHC.

Ultimately, the guarantee of Freddie Mac and Fanny Mae was based on the US government's guarantee and this latest change just makes this point obvious. The US government is assuming responsibility for the guarantees it implicitly gave in the past.

If you countersign your son's application for a credit card before he goes to college, then you're ultimately on the hook if he uses it and can't pay his monthly minimum. Does this mean that you've taken over your son's credit card?

----

Incidentally, Fanny Mae was originally a State-owned enterprise when founded in the 1930s under Roosevelt. (The CMHC was an imitation, as is often the case in Canada, founded in the 1940s. Contrary to what CBC-style English Canadian nationalists would have you believe, we usually copy Americans in our social/economic policies.) Fanny Mae was privatized in the late 1960s (under Johnson, I think, to get it off the government books and improve the budget numbers for political reasons) and now it's apparently back as a State enterprise.

So, should the State be involved in the mortgage market this way? I dunno.

The single largest purcahse of most people is a house and so North America's financial system largely exists to finance the purcahse of a home. When a young couple buys their first home with a small or non-existent down payment, they receive a huge transfer of wealth from other anonymous people. North America's financial system organizes this transfer of wealth. Such a system is unprecedented in human history and almost non-existent elsewhere in the world.

My Libertarian side says that if the State gets involved, there will be a false sense of security and invariably it will turn into a tragic mess. My practical side looks at all the good that a loan guarantee can accomplish. For example, no private bank would ever loan money to a young student to pay for university studies. Because of student loans (and State loan guarantees), the world is a better place. Or look at North America. Many ordinary people from around the world can own their own home.

Edited September 12, 2008 by August1991

[jdobbin]

So, should the State be involved in the mortgage market this way? I dunno.

I think what has been shown is that very lose rules on accountability made the mess possible and the private financial sector led the charge down the speculative alley.

The libertarian in you believes in chaos and unrest?

[August1991]

I think what has been shown is that very lose rules on accountability made the mess possible and the private financial sector led the charge down the speculative alley.

The libertarian in you believes in chaos and unrest?

Dobbin, once the State steps in, there is essentially no accountability. It's the nature of the State.

OTOH, if we didn't have State-guaranteed mortgages, we wouldn't have chaos or anarchy. We wouldn't have many mortgages at all. And many people would be living in sub-standard housing or housing below their desires and what their income can command (which is the case in most of the world outside of North America).

In the present world, there is no way a young, honest couple in their early 20s can borrow a $300,000 house from someone (other than someone in their family). Who would lend it to them? The only way that this is possible is if the State guarantees the loan.

About half of North America's financial system is designed around these transactions. Many anonymous older people give up claims on real assets and one young couple gets a large real asset, a house. This transaction occurs because the State offers a guarantee that is, in the vast majority of cases, unnecessary. The young couple is honest and pays everyone back. But to get the various parties to do the deal, and lend the money, they need the reassurance of a State guarantee.

That's what Fanny Mae and the CMHC largely do. They provide security. And unfortunately, security doesn't really exist. State security is illusory like all claims of security.

Edited September 12, 2008 by August1991

[jdobbin]

Dobbin, once the State steps in, there is essentially no accountability. It's the nature of the State.

OTOH, if we didn't have State-guaranteed mortgages, we wouldn't have chaos or anarchy. We wouldn't have many mortgages at all. And many people would be living in sub-standard housing or housing below their desires and what their income can command (which is the case in most of the world outside of North America).

I think you can say there is anarchy and chaos in the world outside North America where people don't have the supports for housing that we see where we live.

So... is the state being accountable or not? You seem torn.

Edited September 12, 2008 by jdobbin

[HisSelf]

I think you can say there is anarchy and chaos in the world outside North America where people don't have the supports for housing that we see where we live.

So... is the state being accountable or not? Your seem torn.

Scuttlebutt on BNN is that both had loosey-goosey accounting that would make Enron proud. Today their shares fell below a penny a piece. That's what happens when the government takes you over. Your shares become worthless.

The point I was trying to make is that the wonderful free-market capitalist system is not the be all and end all that capitalists would have us believe. We had the dot com bubble. Grown men were weeping. Now we have the sub-prime mortgage mess. More weeping. We are in the unfortunate position right now of having to depend on the US taxpayer to estoppel a world-wide collapse. No I don't think this makes the US a kingmaker. They made this mess!

Any idea that capitalism is some sort of godsend is naive. Captalism is essentially chaos. It would be much better if it had measurable metrics. Unfortunately, it has only very fuzzy metrics. Try getting a handle on the metrics of the oil market. Arguably one of the most important markets in the world and nobody really believes any of the metrics extant. You would have better success trying to understand string theory. And guess what? Central socialist planning had the same problem!

If a free market system is to work well it must have reliable metrics. Where are they? Who can be trusted to supply them? Right now, I'd say nobody.

Edited September 12, 2008 by HisSelf